Muted earnings growth key risk for markets: HDFC MF

Srinivas Rao Ravuri, Senior Fund Manager - Equities, HDFC Mutual Fund feels the short term outlook for the markets are challenging. He expects further disappointment in the first quarter earnings and the muted earnings growth remains a key risk for markets, believes Ravuri. However, he is optimistic about earnings growth picking up in FY14.

Srinivas Rao Ravuri, Senior Fund Manager - Equities, HDFC Mutual Fund feels the short term outlook for the markets are challenging. He expects further disappointment in the first quarter earnings and the muted earnings growth remains a key risk for markets, believes Ravuri. However, he is optimistic about earnings growth picking up in FY14.

Srinivas Rao Ravuri, Senior Fund Manager - Equities, HDFC Mutual Fund feels the short term outlook for the markets are challenging. He expects further disappointment in the first quarter earnings and the muted earnings growth remains a key risk for markets, believes Ravuri. However, he is optimistic about earnings growth picking up in FY14.

Inflows into mutual funds are also primarily coming through SIPs and outflows in infrastructure funds have also been noticed, added Ravuri. He went on to say that there is no significant churn in diversified equity funds. Besides, looking at the present market conditions, HDFC MF has reduced exposure to FMCG due to its valuations and prefer exposure to banking, where valuations are attractive.

Here is the edited transcript of the interview on CNBC-TV18.

Q: How is it looking for the market given the various cues that you are picking up from earnings to monsoon, does it look like the markets have much upside given the environment that we are trading in today?

A: Yes, short term definitely looks challenging given the factors that you outlined. Also, the fact that government activity or we have been waiting for diesel deregulation and it looks like it will get delayed again. There are quite a few factors which look challenging at this point of time.

Though expectations have been low, the results we have seen till now have been mixed. I think the bad numbers will actually come in by August 15 or so. But, I think this is also an opportunity if you have an 18-24 months view. So in the short term, things look uncertain and challenging.

Q: How have your retail or HNI clients been approaching this? Are you seeing steady redemptions because of this environment or have you seen any kind of in flows over the last couple of months?

A: Yes, ofcourse we have seen inflows but they were much lower than what we have seen in the past. Typically, we have two sets of investors. One set of investors come into equity funds with a one month or one quarter to one year view and the other set of investors come in with a much longer term view as a way to build their wealth.

We continue to see money coming, especially through the SIP route. But, people who are trying to time the market have definitely turned more cautious now.